The Different Types Of Business Models For Start-Up Companies

Advice for new start-ups when creating a strong, tried and true business model and plan.

Why Do Startup Companies Need A Business Model

It is important for an entrepreneur or owner of a startup company to have a business model in place before putting money into their idea or trying to get investors for their idea. The reason why this is important is because a great idea or concept does not automatically mean that a business will be successful. The entrepreneur or owner of the startup must have the proper business model that will be able to make money so their business can sustain itself. Entrepreneurs or new business owners must take the following things into consideration when starting a new company such as what is the best business model for my company that will allow for my company to generate revenue so it can be successful.

Things The New Business Owner Should Consider

When an entrepreneur or new business owner is choosing a business model they must ensure that the business model is bringing the customer a solution to a problem and if they are competing with a competitor that their solution is better than their competitors. The new business owner or entrepreneur should not lean on his or her own understanding and try to tweak a business model or invent a new one. The reason why the new business owner or entrepreneur should consider not doing this is because the business model that they have invented or tweaked is not proven. If a business model is not proven it may not generate revenue for their company. After all the whole point of starting a company is to get a return on investment. So the best thing to do is to go with a proven business model that will almost guarantee a return on investment.

What Are Disruptive Models

A disruptive business model is a business model that causes a disruption in a certain industry. An example of this is how Lyft and Uber have caused a disruption in the taxi industry. A second example is how Airbnb has caused a disruption in the hotel industry. The disruption model is used mostly in the technology space and in the form of an app or online platform. If an entrepreneur or new business owner expects to have a successful disruption model it must be customer focused. What is meant by customer focus is that it solves a need or make something easily accessible to a customer. Some of the easiest disruption models are subscriptions and platform business models. Examples of the disruptive models are freemium model, subscription model, marketplace model, sharing economy model, pyramid model, and on-demand model.

Four Conventional Types Of Business Models

The four most common and conventional types of business models are manufactured, distributor, retailer, and franchise. The manufacturer business model is when a business creates a product from raw materials and then sales this product directly to consumers or two another business. The distributor business model is when a business's main focus is to purchase products from a manufacturer and then resale the product that they have purchased to the general public or to a retail outlet. An example of distributor business model is drop shipping. The retail business model is based off of a retailer purchasing products from a distributor and then selling these products at a physical retail location or online retail platform. The franchise business model is the most diverse of the conventional business models.

The franchise model can be label as a retailer, manufacturer, or distributor depending on the type of franchise that the entrepreneur invests in. The first franchise model is the retail model and this is when the franchise has both a physical location and an online platform to sell products. If you have a franchise where you create the products and sell them to businesses or to customers this is the manufacturer franchise model. Lastly if you have a distributor franchise you will focus you business on purchasing from the manufacturer and then resealing the product to the general public.

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